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S.A. to rethink energy security target after deleting battery storage

S.A. to rethink energy security target after deleting battery storage

By Giles Parkinson on 30 May 2017

The South Australia government is expected to rethink the draft legislation of its planned energy security target after being told its current design will
end up simply providing a multi-billion dollar subsidy to gas, and will do nothing to lower prices for consumers or increase energy security. The draft
legislation for the energy security target was released earlier this month, and as we reported then its decision to grant incentives only to “real
inertia” appeared to effectively rule out battery storage, and put a question mark over future wind and solar developments in the state.

Energy minister Tom Koutsantonis has been told that if the draft is not changed, the legislation would effectively put a cap on renewables, raise the cost
of wholesale electricity and likely fail to deliver any more energy security.

The only thing it would deliver, critics say, is a $3.5 billion subsidy to the owners of state’s gas generators, the very people who have caused prices
to jump because of the rising cost of gas, and what the Australian Energy regulator notes is the “region’s relatively concentrated generator ownership
…. and (their) bidding behaviour.”

South Australia says it wants to ensure that 36 per cent of its electricity demand comes from local dispatchable generation, rising to 50 per cent by 2025,
but the controversy arises over its definition of qualified generation as providing “real inertia” and “fault current”.

This, the critics say, effectively excludes battery storage and other technologies in favour of “real inertia” from spinning turbines, meaning that gas
generators will receive an effective subsidy of up to $50/MWh, reinforcing the market power of the small cabal that operate gas generation in the state.

The government says that the legislation could also encourage pumped hydro or solar thermal, but the solar thermal industry is also saying that would not
be enough to bring new projects on line, and is urging a smarter solution that recognises emissions benefits and when this security is actually needed.

There is still debate about how much “real inertia” is needed in an electricity system. “Synthetic inertia” – from battery storage and also wind and solar
farms – can provide much of the grid services, but the decision to effectively exclude it as seen as self defeating.

AEMO has done some deep studies into the inertia issue, and as we reported recently, the thinking about inertia and whether it should be real or synthetic
is evolving as rapidly as the debate around renewable energy penetration over the last few decades.

What seemed impossible a few years ago now seems do-able, as new technologies, and particularly new software enters the market, along with new thinking
about how to manage the grid.

AEMO’s research suggested that half of the inertia could be synthetic, but is still cautious about going the whole hog. It commissioned a report from GE
that shows that many technologies can provide security at much lower cost than thermal plant. A Clean Energy Council report also highlights this.

German battery storage developer Younicos has no such doubts. “We have heard of the ‘real inertia’ discussion and it sounds a little strange to us,” says
Philip Hiersemenzel from the Berlin-based Younicos.

“There is, of course, absolutely no need for ‘real inertia’ rather a ‘synthetic inertia’ to keep the grid stable,” Hiersemenzel says.

“In fact, if you’re starting from the premise that more and more power should and will be provided by cheap, clean, but intermittent renewables such as
wind and solar, then ‘synthetic’ inertia has a number of manifest advantages.”

These included the ability to manage faster ramp rates. “This phenomenon is most easily evident on island systems – simply because they are smaller and
it’s easier to implement a higher share of renewables there. But what holds on islands also holds for larger grids.”

And he says that because such “real inertia” plants always need to be on or run at a certain minimum in order to react to changes in the grid, they block
large parts of the grid with this must-run capacity – which basically limits renewables.

There is a suggestion that South Australia may wait until they see the recommendations of the Finkel Review, which is likely to focus on the issue of energy
security with high and rising shares of renewables.

AEMO, under the leadership of new CEO Audrey Zibelman, is having major input into this, especially given her experience in New York and running one of
the biggest energy markets in the US.

This could give the option of either following in a national target that focuses on grid security, and particularly on technologies such as storage, demand
management and efficiency, or continuing on their own but moving away from requiring “synchronous” local power, or “real inertia.”

One observer, who asked not to be named, says much of the debate going on about what “real” inertia is, and the technical merits of various technologies
to provide inertia, has been self-serving and framed by interests of the gas lobby and gas turbine machine suppliers.

“As defined in the draft legislation, inertia only includes that derived from kinetic energy. This is clearly problematic for solar PV at small or large-scale,
and battery systems.

“It strongly favours gas, (and potentially solar thermal and pumped hydro and biomass power as well, though by the time these plants might be permitted
and built, at least a third of the scheme’s benefit will have expired).

“There is no value attributed to time of supply in a day, nor the stability conditions of the grid at any point in time. It will be settled annually, so
it seems to bear little if any relationship to grid stability, which is a second to second matter, dependent on current operating plant and interconnector
flows.”

He said there is no apparent influence about when gas might be dispatched to create the certificates. In other words, it would be possible for and AGL
or Origin to “dump” gas into their generation to establish the necessary certificates they need when gas is cheap.

It would be meaningless when it comes to providing stability to the grid.

Dylan McConnell, from the Climate and Energy College in Melbourne, takes up that argument, saying the legislation as presented may do little, if anything,
to improve system security.

“There is no incentive to provide additional capacity and “inertia” when the system theoretically needs it – when there is a lots of wind!” McConnell says.

It might increase gas generation when gas generally already generates (i.e. when there is not so much wind, and there a lots of imports and lots of gas).

Pointing to this graph above, McConnell says there is already more gas electricity produced (5300GWh) than the target next year (4500GWh).

“This leads me to think that there might be an emissions threshold somewhere between Torrens and Osbourne (… otherwise, why have the policy at all
– as the certificate price should, in therory at least – reduce the marginal cost of all gas generators similarly).”

He says the current design would actually explicitly prevent flywheels and synchronous condensers – which could actually provide inertia at all time.

“That seems strange … and the seeming exclusion of batteries also makes little sense – particularly considering the fact that gas generation can
only provide inertia when it is actually on! (Unlike batteries, which can sit there and respond very incredibly quickly).

“Gas generators also have to run at minimum load (which can be significant) to do this, rather than a battery, flywheels and/or synchronous condensers.

“Most offline gas generation has T1 (time to synchronisation) greater than 5 minutes, and T2 times (time to minimum load) of more than 10 minutes – which
is hardly useful from a system security standpoint (and compared with less than 100 milliseconds for batteries).”

Keith Lovegrove, from the Australian Solar Thermal Association (Austela) agrees that there should be an emissions threshold, and a generally more sophisticated
approach to awarding certificates.

In Austela’s submission, Lovegrove questions the “relatively low price cap”, saying it was too low to significantly influence generator behaviour at times
of high wholesale prices in the NEM.

It also wanted further clarity on the definitions of “fault current” and “real inertia” and noted that there was a “reasonable case” to widen the eligibility.

“If this is done then it will be important to adjust other points to avoid perverse outcomes such as electricity storage units that cycle repeatedly on
short timescales to artificially maximise Energy Security Certificate income.

Lovegrove favoured an approach that specifically rewarded lower emissions, generation when it is needed most for stability, and generation that would take
place to avoid price spikes.

Andrew Stock – who worked for 40 years in energy industry, including thermal and renewable generation – said the legislation as currently framed favours
outdated technologies, ageing plant and fossil fuels, and further entrenches market power of gas generators.

“It creates market and regulatory barriers to deploying modern technical solutions to grid stability challenges … and there is little suggestion
that grid security will actually be improved.

“It could actually limit the further uptake of renewable generation in the state,” which the AER notes in its annual report released on Tuesday amounts
to nearly 50 per cent so far this year. (See the graph above, on the right hand side).

Add in rooftop solar, which is about 7 per cent of demand, and the share of wind and solar is already more than 50 per cent (see graph above).